A Statement of Work, or SOW, is a well-known document for anyone involved with project management. An SOW is the first step toward collaboration between two companies. It is a legally binding document; as such, it’s imperative to ensure that the statement of work is as detailed and accurate as possible. The slightest mistake or misunderstanding can cause undue risk catastrophic to your company and proposed project.
What is a Statement of Work (SOW)?
The Statement of Work is a contract between the client and the vendor. It defines what will be delivered by the vendor, how long it will take, and how much it will cost. In other words, it’s a detailed description of a project’s requirements. It includes specifications and requirements of the final product or service and all other information required by the customer. The Statement of Work describes the roles and responsibilities of all parties to the contract and establishes a commitment on behalf of all parties to the proposed project.
An SOW can be broken down into three distinct categories:
- Design: This is the most common type of SOW and is usually based on a fixed price. It provides detailed instructions on what needs to be done, who will do it, when they will do it, and how much it will cost.
- Time and Materials: A time-and-materials SOW is typically used when multiple items need to be built, or services need to be performed. The SOW specifies a maximum amount of time for project completion and an hourly rate for labor.
- Performance-Based: A performance-based SOW describes the desired results and then leaves it up to the contractor how best to achieve them. This type of SOW is often used in engineering projects where specific technical requirements must be met, but no one knows exactly how they will accomplish those goals yet (i.e., building a bridge).
What does an SOW document do?
A Statement of Work is a formal document that details the outcome you want your project to achieve. An SOW documents every step along the way, from the scope of work to deliverables, costs, and any other items needed to complete the project.
The Statement of Work is simply a way of communicating expectations from both sides of a project. The SOW details the expectations from a vendor to a client and is the standard against which contractor performance is evaluated.
Because of this, a procurement team must take care to ensure that a Statement of Work conveys the following elements:
- Be unambiguous in language to prevent confusion and misunderstandings.
- Be clear enough to lay out all the proposed project details clearly.
- Be accurate and realistic about promised timelines, due dates, and costs.
- Be logical enough to be understood by all parties who may need to read and interpret the SOW.
A Statement of Work must communicate an organization’s expectations from a prospective service provider. The SOW is a living document that changes as the project progresses.
Why are SOWs needed?
As previously stated, a Statement of Work is a detailed overview of the project scope. It’s a way to share the project requirements, acceptance criteria, and payment terms with everyone working on the project, whether their roles are collaborative or contracted. This can include stakeholders like vendors and contractors bidding to work on the project.
An SOW helps contractors stay organized and manage projects effectively.
8 Steps to Writing a Successful SOW
Step 1: Introduce the Project
The first step in writing a successful SOW is introducing the project and what it entails. Introduce the project and ensure the client understands that the SOW is a formal agreement. Your client will want to know very detailed information, so give them as much information as possible about what they’ll be receiving throughout this project.
Identify all the stakeholders involved in this project—their roles, interests, and concerns, and how they will be involved (if at all). This will help potential clients decide whether they want to move forward with you as their provider of choice.
Step 2: Define the Project Objectives and Requirements
To ensure that everyone understands the nature of the deliverables, you should begin your Statement of Work by defining the project objectives. The objective is the ultimate goal of the project. It is a statement that explains what you want to achieve andt often includes a timeframe.
Once you’ve established your project’s objective, you can outline its requirements. These are the specifications that describe how you will achieve your objectives.
After defining your project’s objectives and requirements, include them in clear terms within your Statement of Work so that everyone involved knows exactly what they entail.
Step 3: Explain the Project Scope
When starting a new project, one of the most significant matters to establish is project scope. The scope is a list of everything included in the project (in scope) and everything that isn’t (out of scope).
Expenses that could be considered “out of scope” might include travel expenses and accommodation costs for your team members, legal advice, or other professional services unrelated to your team’s work on a project.
Step 4: Specify the Tasks to be Completed
Tasks are activities and milestones to be completed to accomplish the contract objectives. Milestones, deliverables, or processes may structure the tasks.
This section of the statement of work (SOW) should include:
- A list of all tasks
- A description of each task (what will be done)
- A description of how long each task should take to complete
- The resources required to complete each task (who will do it)
In addition to specifying to be completed, it is also important to specify any dependencies among tasks. For example, if you plan to create a prototype before analyzing requirements, you should outline the dependency between these two tasks.
Step 5: Establish Time Frame and Deliverables
You should specify how much time each task will require to complete and how much time each task will require overall by combining all tasks into one large project estimate.
You’ll want to ensure that you have an appropriate timeline for completing your project. That means setting a deadline for when you expect it will be completed and determining how much time it will take to complete the work. The length of time will depend on factors like how much work there is left to do and whether any additional resources are needed (i.e., if you need help from someone else).
It would help if you also established what deliverables are expected as part of a project so that everyone involved knows what is in the project’s scope.
Step 6: Specify the Associated Costs
In any business relationship, there are always associated costs. You must ensure you’re as straightforward as possible about how much money is being exchanged for what service.
Step 7: Include Specific Obligations and Responsibilities
Be sure to include specific obligations and responsibilities in the Statement of Work.
- A clear description of what is expected from the contractor.
- How the contractor will be paid.
- What happens if things go wrong, and who is responsible for fixing them.
The Statement of Work should include any specific requirements for the project. This includes meetings, calls, conferences, or other “soft” deliverables. If any requirements are not a product of a specific task but are required of the performing party, these must also be described in the administration section of the SOW.
Step 8: Signatures from Involved Parties
All parties involved should sign the SOW before implementing any changes or modifications to the contract. This will help ensure everyone is on the same page and no one feels like they are being taken advantage of during their work.
When signing off on this document, it’s important to remember that it does not just serve as a legal contract; it also works as a formal document and practical action plan for initiating and implementing your project.
Expedience Software’s SOW Software
SOW management software helps improve your company’s internal process for creating and managing SOWs. It can automate many of the more tedious tasks, enable you to create more accurate SOWs in less time, and manage all aspects of your project from a central location. As a result, it improves effectiveness across your business by maximizing all your team members’ efficiency and empowering them to work better together.
If you’re looking for a better way to manage and automate your SOW processes, Expedience Software can help. If you’d like to learn more about our software and how we might be able to help, please feel free to contact us. We look forward to hearing from you.